Introduction

Karnal bunt (sometimes called partial bunt), caused by

the fungus Tilletia indica Mitra, seldom results in significant yield losses to wheat in the field. The fungus

does not produce any toxic compounds in leaf, stem

tissue, or seed that pose health risks when consumed

(Bonde). Because the fungus poses no risk to human

health, the U.S. Government does not have any food

safety regulations concerning Karnal bunt. However,

Karnal bunt affects flour quality if more than 3 percent

of the grains are bunted because it produces trimethylamine, which gives off a fishy odor. Pasta products

made with flour contaminated with Karnal bunt can

have an unacceptable color. 

Many U.S. trading partners will not accept U.S. wheat

exports unless the wheat is certified to be from areas

where Karnal bunt is not known to occur. USDA’s

Animal and Plant Health Inspection Service (APHIS)

imposes quarantines in an attempt to contain the

spread of Karnal bunt in the United States and conducts an annual voluntary survey of grain delivered to

elevators to check for Karnal bunt across the country.

The use of quarantines and the survey are the basis

upon which APHIS is able to issue a certificate that is

accepted by countries importing U.S. wheat.

Some have proposed that the Karnal bunt quarantine

regulations and surveys be ended, suggesting that

USDA should consider contaminated wheat a quality

issue and establish tolerances for contamination

(Combs). This paper analyzes the market effects of

abruptly ending the issuance of certificates stating that

U.S. wheat is from areas where Karnal bunt is not

known to occur in the face of continuing barriers in

many overseas markets. 

The Incidence of Karnal Bunt

Karnal bunt is geographically isolated, limited to the

Indian subcontinent, a small area of Mexico, and the

southwestern United States (Murray and Brennan).

Karnal bunt is so named because it was discovered in

1931 on wheat grown near Karnal, India. The disease

was first confirmed outside of Asia in 1972 in the State

Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  1

Special Article

Economic Analysis of Ending the Issuance of 

Karnal Bunt Phytosanitary Wheat Export Certificates

Gary Vocke, Edward W. Allen, J. Michael Price1

Abstract: Karnal bunt is a wheat disease that is subject to regulation in the United

States through quarantining of affected counties to limit its spread. Currently, the

Karnal bunt regulatory program allows the U.S. Department of Agriculture (USDA)

to issue phytosanitary export certificates stating that wheat in a given shipment is

from an area where Karnal bunt is not known to occur. Ending this certifiation program would jeopardize U.S. exports to some countries. A model developed by the

Economic Research Service was used to analyze a scenario of ending the certification. The loss of export markets for U.S. wheat producers would be only partially

offset by increased domestic feeding of lower-priced wheat. Wheat prices would

remain below baseline levels. Reduced wheat production and lower prices for wheat

combine to reduce the total value of the wheat produced in the country, as well as

the net income in U.S. agriculture. The cumulative reduction of national net farm

income from 2003 to 2007 relative to the baseline is $5.3 billion. However, this

includes cumulative marketing loan payments associated with all crops of $2.0 billion above the baseline over the 2003-07 period.

Keywords: Wheat, Karnal bunt.

1 The authors are Agricultural Economists with the Economic

Research Service, Market & Trade Economics Division.
of Sonora, in northwest Mexico (Dept. for

Environment, Food & Rural Affairs).

The disease was first found in the United States in

1996, in Arizona, Texas, and California, and again in

Texas in 1998. The latest outbreak was in north Texas

in 2001. It is not known how the disease spread to the

southwestern United States and then to north Texas.

Because the early outbreaks were isolated from the

major wheat-producing areas, the possibility of the

disease’s spreading to principal wheat-growing areas

was thought to be minimal. However, the 2001 outbreak of Karnal bunt in north Texas was at the edge of

the major wheat area of the Southern Plains (see fig.

A-1). This raised the prospect that the disease could

spread as far north as the spores can tolerate winter

weather conditions. Karnal bunt spores may rapidly

decay under extreme cold, suggesting that significant

portions of the northern United States would not be

conducive to long-term survival (and therefore permanent establishment) of Karnal bunt (Dobesberger,

Jimenez, and Sequreira).

The occurrence of bunted kernels in areas infested

with Karnal bunt spores is typically low. The ideal

conditions for infection are temperatures in the range

of 59-72 degrees F. and accompanied by rainfall, overhead irrigation, or high humidity. These conditions

must occur during heading and for a few weeks afterward for bunted kernels to develop (Forster and Blair).

These strict environmental conditions make it possible

for problems with Karnal bunt to be only intermittent

even if soil spore concentrations are high.

Spreading Karnal Bunt

Karnal bunt spores can be carried in soil and on a variety of surfaces, including seeds and other plant parts,

farm equipment, tools, and vehicles. They can also be

windborne. Karnal bunt spores are resistant to dry conditions, sunlight, a wide range of temperatures, and

most fungicides. Wheat that is not infected can

become contaminated with spores by passing through

spore-contaminated equipment, transport vessels, or

facilities. Other grains can also be contaminated with

spores in the same way.

While Karnal bunt is not harmful to animals, it is suspected that spores in contaminated or infected feed

(grain or bran from milled wheat) can survive ingestion by animals. Since the manure of livestock fed

such feed is potentially a source of inoculum, bunted

wheat in quarantined counties must be heat-treated if

used for animal feed.

The American Phytopathological Society states that

the experience from countries where Karnal bunt

occurs suggests that Karnal bunt is a minor disease

and the little risk that does exist for grain quality can

be effectively managed with resistant varieties without

the use of quarantines (American Phytopathological

Society). The Society also suggests that although quarantines may delay the introduction of Karnal bunt into

new areas, they are unlikely to prevent such introductions and subsequent establishment. This conclusion

has been confirmed repeatedly, most recently by the

occurrence of Karnal bunt in the United Sates despite

quarantines imposed on wheat from countries where

the disease has been known to occur.

Quarantines may be ineffective where wheat-growing

areas are contiguous, as between Mexico and the

United States. However, where longer distances apply,

as between continents or where deserts or mountains

intervene, quarantines may help to protect countries

that do not have Karnal bunt (Murray and Brennan).

Yield Losses to Karnal Bunt

Karnal bunt spores usually replace only a portion of

the developing kernel and only a few of the kernels in

a head. Complete conversion of kernels to spores is

rare. Thus, yield reductions are generally minimal. For

example, surveys in India during years of heavy disease infestations revealed a general, area-wide yield

loss of less than 0.5 percent (Davila). However, in a

few fields with highly susceptible varieties, as much as

89 percent of the kernels were infected, with yield

losses ranging from 20 to 40 percent.

Options for Karnal Bunt Control

Wheat breeders in areas with Karnal bunt recognize

the importance of avoiding the release of highly susceptible varieties.2 This control measure has proven

effective for reducing the level of Karnal bunt sufficiently that quality of the harvested grain is not severely affected. However, resistant varieties do not eradicate the disease, and Karnal bunt epidemics have

recurred in India as soon as susceptible varieties were

again grown (Murray and Brennan).

Apparently, cultural practices are of little practical

value in reducing the probability of an outbreak

(Murray and Brennan). Seed treatments can reduce the

2  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA

2 International Maize and Wheat Institute (CIMMYT) has identified 98 resistant lines of bread wheat, and Punjab Agricultural

University, India, has 68 resistant lines (Davila).
number of viable spores on seed, and, therefore, the

probability that Karnal bunt will be introduced to new

areas. Foliar application of fungicides can reduce the

level of disease, but more than one application is usually required, making this an expensive control option.

Fungicides are likely to be cost effective only if other

important diseases, such as rusts or Septoria blotches,

are also present. Fumigation of soil with chemicals,

such as methyl bromide, metham-sodium, and

formaldehyde, has been partially successful in killing

the spores.

Exporting Under Deregulation 

Is Problematic

Not all countries that have restrictions against 

Karnal bunt would, in practice, strictly prohibit wheat

imports from the United States if USDA stopped issuing certificates. Each country has regulations that 

are often idiosyncratic in how they are written and

enforced. For example, Italy and Germany currently

import wheat from countries where Karnal bunt is

known to occur, after testing to ensure the wheat is

free of Karnal bunt, despite European Union regulations against such a practice.

In addition, while some markets would be captured by

wheat-exporting countries that are free of Karnal bunt,

U.S. wheat exports to countries that have no restrictions

against Karnal bunt would likely increase. The longrun

effects would likely depend on the extent that world

wheat markets treat Karnal bunt as a quality issue.

There is also an issue of what procedure would be used

by other countries for Karnal bunt testing if the United

States should stop issuing certificates. Currently, there is

no accurate Karnal bunt test available that is rapid

enough to use during ship loading. Even the microscopic examination for spores with the “wash test” can lead

to false positives because of bunt on ryegrass Tilletia

walkeri. Annual ryegrass is a significant weed problem

in wheat fields in the southeastern United States. The

wash test is currently used for seed wheat to ensure that

Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  3

Figure A-1

Karnal bunt now established at the southern edge of hard red winter plantings 

(area planted 1998)

1 Dot = 5,000 planted acres at the county level

(counties with less than 5,000 acres do not appear)

Restricted counties

Durum

Hard red spring

White

Hard red winter

Soft red spring
there is no disease present. For non-seed wheat, USDA

uses a “bunted kernel test” which involves visual

inspection for bunt on the grain kernel. Spore-contaminated grain can pass the bunted kernel test. Currently,

most importing countries, even with phytosanitary regulations against Karnal bunt, accept APHIS’s certificate

that the wheat comes from an area not known to have

Karnal bunt, and do not routinely test for Karnal bunt

spores or check for bunted kernels.

If even a few important wheat-importing countries

maintain prohibitions, shipping companies may have

concerns about shipping wheat from a deregulated

U.S. wheat sector. Ship owners wishing to protect their

interests may insist on a certificate from an authoritative U.S. source that unequivocally confirms that the

cargo is free from Karnal bunt spores. 

Further, shipping vessels that carried contaminated

wheat to countries without prohibitions would have 

to be sanitized to ensure that later cargoes from other

sources going to countries that continue to have prohibitions will not be contaminated. Under U.S. deregulation,

spores could spread through the storage and transport

equipment to other products like corn and soybeans.

The cost of testing and sanitizing to ensure freedom

from the disease would likely be considerable. 

There may also be issues with transshipment through

the St. Lawrence Seaway if the United States deregulates Karnal bunt. Currently, Canada prohibits the

entry of wheat from States with Karnal bunt. Any

wheat that crosses the Canadian border needs a declaration that the grain originated in an area free of

Karnal bunt on the basis of official surveys.

The future importance of these issues will likely

depend on whether Karnal bunt becomes widespread

across the U.S. wheat sector. However, there is no certainty about how far and how rapidly the disease might

spread if the quarantine system is eliminated.

The USDA Regulated Areas

An area that is regulated by USDA for Karnal bunt is a

definable commercial wheat-production area that

includes at least one field that tested positive for

Karnal bunted kernels. USDA restricts movement of

wheat grain, straw, hay and farm equipment within and

out of these regulated areas. USDA tests wheat grown

in regulated areas each year for Karnal bunted kernels.

Currently, in a regulated area, a grain sample must be

drawn by an APHIS inspector or State cooperator at

the time of harvest, or if already harvested, from the

storage bins, and examined for bunted kernels. If the

sample is taken from the field as it is being harvested

and no bunted kernels are found, a certificate will be

issued and the grain allowed to be transported to any

market. If the grain sample came from grain already in

storage and no bunted kernels are found, then a permit

will be issued for the grain to be transported to any

market. If one or more bunted kernels are found in the

sample, then a notice will be issued and the grain

sealed in the storage facility prior to approved treatment or disposal.

In a regulated area, wheat grown to produce seed can

be planted only within the regulated area and only if

the seed tests spore negative through the wash test.

Seed wheat cannot be moved outside the regulated

area. Any seed grown in a regulated area that tests

spore positive (based on the wash test), but is bunt

negative (based on visual inspection) cannot leave the

area for seeding purposes, but it can leave the area for

export as grain to a country that does not require an

APHIS Karnal bunt certificate or for domestic use for

livestock feed or milling.

Wheat grain, straw, or wheat hay that tests bunt positive

cannot be moved outside the regulated area without

APHIS approval. If needed, a permit is issued to allow

the transport of these products to an approved facility

outside the regulated area for treatment or disposal.

Karnal bunt quarantines have been controversial since

they were initiated in 1996. To increase cooperation,

USDA compensates producers, grain handlers, and

other affected parties for losses suffered due to the

Federal quarantine action. Compensation payments

have totaled about $35 million since 1996 (U.S.

Department of Agriculture).

Estimating the Effects of Karnal 

Bunt Deregulation

Even though Karnal bunt poses no health risk, many

U.S. wheat export markets have a precautionary stance

against the acceptance of wheat without a certificate

indicating the wheat is from an area where Karnal bunt

is not known to occur. Thus, if the United States were

to stop its certification, U.S. wheat would not meet

those importing countries’ phytosanitary requirements.

It is uncertain how the wheat-importing countries of

the world would react if the United States were to end

its Karnal bunt quarantine regulation. The reaction of

many countries would likely depend upon how fre4  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA
quent and how widespread Karnal bunt outbreaks

occurred in the United States and the availability of

wheat from other sources. However, it is possible to

anticipate the likely reactions of governments and

industry to deregulation not accompanied by a severe

outbreak. This study does not attempt to forecast

future incidence of Karnal bunt in U.S. wheat fields.

The scenario analyzed assumes a unilateral end to U.S.

karnal bunt certification, without significant success in

getting importing countries to accept something other

than a zero tolerance level for karnal bunt spores. If

ongoing scientific research and diplomatic efforts

cause a significant number of wheat importers to

accept a more relaxed standard than a zero tolerance,

then trade effects would likely be smaller. However,

such efforts would undoubtedly take time. 

With unilateral deregulation, we assumed that most of

the adverse reactions of U.S. wheat customers would

fall on hard red winter wheat (HRW) producers in the

Central and Southern Plains and soft red winter wheat

(SRW) producers (these two classes averaged 62 percent of U.S. wheat production between 1996 and

2000). The combination of weather conditions and

stage of plant growth needed to result in Karnal bunt

infection are most likely in areas where these two

classes of wheat are grown (Dobeseberger, Jimenez,

and Sequeira). Because U.S. wheat is blended, we also

assumed that HRW and SRW from northern States that

might not be susceptible to karnal bunt cannot be certified as free of spores. However, the harsh winters in

the northern United States where the other classes of

wheat are principally grown are expected to prevent

the spread of the disease into those regions. U.S.

domestic and international customers for the three

classes of wheat: hard red spring (HRS), durum in the

Northern Plains, and white wheat (from the traditional

Pacific Northwest and Northeastern white wheat areas,

not Kansas) are assumed to be unconcerned about

Karnal bunt contamination, even with decertification.

This lack of concern assumes that some alternative

government or private certification is found acceptable

for importers of spring and white wheat and is a major

reason why this scenario does not have a larger U.S.

trade loss. Moreover, Canada is also assumed to accept

alternative certification, allowing transshipments

through the Saint Lawrence. For many common uses,

HRS and HRW are readily substituted, as are SRW

and soft white wheat. 

A world wheat trade model that appropriately estimates

trade flows by class and country was not available to

analyze the issue, so a scenario was developed based

on expert judgment of USDA analysts. A set of

assumptions about prices and trade impacts by country

was developed using the February 2002 trade matrix of

2001/02 world wheat trade. The percent changes in

U.S. wheat exports were then applied, beginning in

2003, relative to the USDA Agricultural Baseline

Projections to 2011, in a U.S. agricultural sector model

to calculate the impacts on the domestic farm sector. 

As a first step, countries were classified by their

antipathy to Karnal bunt and their presumed response

to U.S. deregulation (table A-1). For this analysis, each

significant market for U.S. wheat exports was put into

one of three categories.

Group A, accounting for 25 percent of forecast U.S.

exports, includes countries that: (1) have strict

requirements on Karnal bunt as reported by APHIS,

(2) have a history of strict observance of phytosanitary

regulations, (3) normally import hard red winter

(HRW) or soft red winter wheat (SRW), and (4) could

be expected to remain intransigent about only importing wheat that is certified as coming from a Karnal

bunt-free zone. Important markets in this group

include EU-15, Eastern Europe, China, Egypt, Algeria,

Morocco, Libya, Tunisia, and Brazil.

Group B, accounting for 35 percent of forecast U.S.

exports, includes countries that: (1) have strict requirements on Karnal bunt, as reported by APHIS, (2) may

be somewhat more flexible in implementation of phytosanitary regulations, (3) normally import only a portion of U.S. wheat from regions potentially at risk, and

(4) although decertification would disrupt HRW and

SRW shipments in the first year, over the next 2 years

these countries would be expected to relax Karnal bunt

standards to tolerance levels that would permit trade

and a resumption of imports from the United States.

Important markets in this group include the former

Soviet Union, Yemen, South Korea, Indonesia, Taiwan,

Sri Lanka, Mexico, Venezuela, Colombia, and other

Western Hemisphere countries.

Group C, about 40 percent of forecast U.S. exports,

consists of countries: (1) without strict requirements

on Karnal bunt, as reported by APHIS, (2) that import

only U.S. spring or white wheat, and (3) without significant wheat production, and (4) could be expected

to demand that less than 3 percent of bunted kernels be

allowed according to milling standards, but would not

test for spores. Important countries in this group

Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  5
6  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA

Table A-1--Likely trade effect of unilateral U.S. deregulation of Karnal bunt1/

Total U.S.

Major importers wheat exports HRW share SRW share Other classes 1st year 2nd year 3rd year Long term

KB 2001/02 of U.S. of U.S. share of U.S. export U.S. export U.S. export U.S. export

antipathy forecast exports exports U.S. exports loss 2/ loss 2/ loss 2/ loss 2/

1,000 metric tons

Total Western Europe 2,300 0 550 1,750 385 1,152 439 404

EU-15 high 2,200 0 550 1,650 385 1,122 424 404

Other West Europe high 100 0 0 100 0 30 15 0

Eastern Europe high 100 80 0 20 78 96 86 82

FSU medium 125 100 13 13 111 120 56 28

Total Asia & Middle East 11,975 2,725 523 8,727 1,280 1,958 455 6

Total Middle East 2,425 1,565 131 729 928 1,019 233 73

 Iran 0 0 0 0

 Iraq 0 0 0 0

 Yemen medium 625 0 31 594 31 75 38 19

 Israel low 700 630 56 14 -70 -35 -53 -70

 Other Mid East medium 1,100 935 44 121 967 979 248 124

Total East & SE Asia 9,550 1,160 391 7,998 352 939 222 -66

Japan low 3,040 152 30 2,858 0 0 0

South Korea medium 1,300 260 26 1,014 185 406 92 0

Pakistan low 395 8 0 387 -40 -20 -30 -40

Indonesia medium 250 25 25 200 50 85 43 21

Philippines low 1,700 17 255 1,428 -170 -85 -128 -170

China high 275 14 55 206 69 165 76 69

Malaysia low 200 20 0 180 -20 -10 -15 -20

Bangladesh low 300 195 0 105 -30 -15 -23 -30

Taiwan medium 930 279 0 651 214 172 86 43

Sri Lanka medium 560 101 0 459 55 119 60 30

Other Asia medium 600 90 0 510 39 122 61 30

Total Africa 6,700 3,862 1,834 1,005 3,535 4,239 3,638 3,371

Total North Africa 4,100 1,910 1,598 593 3,329 3,943 3,676 3,502

 Egypt high 3,500 1,680 1,470 350 2,975 3,500 3,273 3,124

 Algeria high 175 35 0 140 35 70 53 44

 Morocco high 225 113 90 23 200 225 220 210

 Libya high 125 75 38 13 111 125 122 117

 Tunisia high 75 8 0 68 8 23 8 8

Sub-Saharan Afr. 2,600 1,952 236 412 206 296 -38 -132

 Nigeria low 1,800 1,584 180 36 -180 -90 -135 -180

 Other Sub-Sahar. medium 800 368 56 376 386 386 97 48

Total Western Hemisphere 6,150 2,908 2,025 1,218 1,486 1,943 733 265

Brazil high 175 105 70 0 175 175 193 184

Mexico low 2,150 1,290 774 86 -215 -99 -157 -215

Peru low 550 451 88 11 -55 28 -14 -55

Venezuela medium 550 165 220 165 369 422 184 92

Colombia medium 550 402 138 11 538 550 269 134

Cuba low 75 75 0 0 -8 -4 -8 -8

Other West Hem. medium 2,100 420 735 945 683 872 265 133

Unaccounted 150 75 75 0

2001/02 Total 27,500 9,750 5,018 12,732 6,876 9,508 5,405 4,156

Percent of total exports 25 35 20 15

1/ Assumes increased U.S. shipments of HRS and White to markets not accepting HRW and SRW as well as increased shipments

of HRW and SRW to markets with low antipathy to Karnal Bunt. After the first year, increased competitors' production also reduces

U.S. market share. 

2/ A positive number indicates a loss of exports, a negative number indicates an increase.
include Israel, Japan, Pakistan, Philippines, Malaysia,

Bangladesh, and Nigeria.

U.S. wheat exports were examined to evaluate the

effect of reducing U.S. HRW and SRW exports to zero

for Groups 1 and 2 during the first year (see table A1). This means that about 60 percent of U.S. customers

would find about 55 percent of U.S. exports unacceptable. Some switching to other U.S. wheat classes is

assumed, but switching would be limited by supplies

and by limited substitutability for some uses. The

world wheat market is segmented: some countries have

inelastic demand, are willing to pay high premiums,

and are expected to be concerned about Karnal bunt;

other countries like discounted, cheap wheat and are

not concerned about Karnal bunt. Assumptions about

responsiveness in each country drives the analysis of

changes in world wheat trade and U.S. exports. 

In the first year, U.S. exports of HRW and SRW are

calculated to increase to those markets still accepting

them, while overall U.S. wheat exports are calculated

to drop nearly 7 million tons, or 25 percent below

baseline levels. Most of the drop in U.S. exports is

expected to be gained by competitors’ exports and

reduced ending stocks (boosting prices in those countries). Importers also draw down stocks some, but the

decline in world wheat trade is small because some

importers actually increase imports of cheaper U.S.

HRW and SRW. 

While the U.S. average farm price for wheat drops significantly (45 cents per bushel in 2003) under this scenario, the premium for spring wheat (relative to the allwheat average farm price) is assumed to be about 50

cents per bushel greater than normal, while the discount

for HRW and SRW would be at least 50 cents greater

than normal. The market impacts of by-class premiums

and discounts are larger than the change in the average

Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  7

Egypt is an important example of how a country

might react to Karnal bunt decertification. Egypt

has strict phytosanitary regulations regarding

Karnal bunt. Moreover, it is a significant producer,

with irrigated land that could be quite susceptible

to the disease. These factors would likely cause

Egypt to be inflexible about accepting wheat with

Karnal bunt spores (a Group A country). However,

while most U.S. exports to Egypt have been HRW

or SRW, some are other classes. U.S. shipments of

white wheat could be expected to increase, limiting

U.S. losses in the first year of the scenario (2003)

to less than 3 million tons (see table A-1).

However, in 2004, increased competition, in this

case especially from Australian white wheat, is

expected to push U.S. wheat out of the Egyptian

market. In the third year and later, after prices and

production in Australia decline from the peak in the

second year, U.S. white wheat shipments to Egypt

recoup losses, ending up higher than without

Karnal bunt. However, without SRW and HRW, the

United States has still lost most of its wheat export

market to Egypt. 

Venezuela is an example of a Group B country

(with medium Karnal bunt antipathy). While

Venezuela has regulations prohibiting Karnal bunt

in wheat imports, and Karnal bunt might propagate

in that climate, Venezuela’s wheat production is

insignificant. Eventually, Venezuela could be

expected to accept a Karnal bunt spore tolerance

greater than zero. However, it would likely take

extensive negotiations. About 70 percent of U.S.

exports to Venezuela are HRW or SRW. In the first

year of the scenario, U.S. HRS shipments would be

expected to increase some, but Canada and

Argentina would be expected to provide intense

competition, replacing most of U.S. HRW and SRW

shipments. In the second year, with negotiations

ongoing and intense competition from Canada, even

the U.S. HRS share is reduced. In the third year,

Venezuela is assumed to accept a reasonable tolerance for Karnal bunt spores, and U.S. exports

increase dramatically, but in the long run Canada

has gained a competitive edge, and the U.S. share

remains about 17 percent below what it would have

been without Karnal bunt. 

A Group C country, with low Karnal Bunt antipathy, like Israel, has no regulation concerning Karnal

bunt. Imports of U.S. wheat are above baseline levels throughout the scenario, but the increase in 2004

is less because increased competitor supplies and

reduced prices limit U.S. gains. In 2005 and later,

the U.S. share increases again because the price of

U.S. HRW and SRW is comparatively attractive. 

Examples By Country
U.S. price received by farmers for wheat. The assumed

relative international price changes (about $1.00 per

bushel) are thus similar enough in magnitude to price

changes in 1995/96 (when the average farm price

increased $1.10) so that the 1994 to 1998 reaction of

U.S. competitors to high prices can provide insight into

their likely reaction in this scenario. 

In 1994/95, the major competitors (Canada, Australia,

EU, and Argentina) reduced wheat stocks more than

11 million tons, while in the Karnal bunt scenario, a 6-

million-ton reduction is anticipated. These countries

increased wheat production by over 30 million tons in

1996/97, but a smaller increase, about 15 million tons,

is assumed in the Karnal bunt scenario because their

price increases would be less than occurred in

1995/96. Moreover, competitors are currently planting

more wheat than in 1994/95, so it will be more difficult for them to expand from this higher base. 

In the second year of the scenario (2004), some of the

importing countries in Group B (see table A-1) are

assumed to adopt less restrictive Karnal bunt standards, opening imports to U.S. HRW and SRW, thereby reducing the direct effect of Karnal bunt trade barriers. However, in that second year, foreign competitors’

production (and U.S. HRS and White wheat) is expected to increase strongly in response to the first year’s

higher prices. Although a portion of competitors’

increased production is used to replenish stocks, much

is expected to move into export channels, further

reducing U.S. market share. In the second year of the

scenario, U.S. wheat exports are estimated down 9.5

million tons, 35 percent below the baseline level (without Karnal bunt). 

In the third year after deregulation, the rest of Group B

countries further relax Karnal bunt import standards,

and competitors’ response is muted, as wheat prices

and premiums in those countries decline. However, in

the third year, U.S. wheat exports are 20 percent below

baseline levels. In subsequent years, the U.S. recaptures some lost market share as price premiums in

competing countries become small. However, the

exclusion of U.S. HRW and SRW from group A markets results in a small premium for U.S. competitors

that are free of Karnal bunt and reduces long-term

U.S. wheat exports by 15 percent below baseline levels. This long-term decline represents a loss in market

share despite the development of alternative regulatory

mechanisms in markets accounting for 80 percent of

U.S. wheat exports. 

No model is available that includes the effects of 

wheat classes on world trade or U.S. regional and class

differences with appropriate substitution elasticities.

Therefore, a more general model was used to quantify

price changes and address the effects on U.S. agriculture. 

Model Simulation Results

The U.S. domestic impacts of terminating certificates

for Karnal bunt were estimated with the Food and

Agricultural Policy Simulator (FAPSIM). FAPSIM is a

large-scale econometric model of the U.S. agricultural

sector maintained by the Economic Research Service

(ERS). The model contains submodels for 24 agricultural commodities, including wheat.3 The model also

includes submodels to estimate the value of exports,

net farm income, and Government outlays on farm

programs for the United States. 

These submodels are linked together through the variables that they share in common. The model computes

the set of market prices that equilibrate supply and

demand in all of the commodity markets simultaneously, given any set of exogenous conditions. 

The estimated trade impacts were introduced into the

model by exogenously reducing wheat exports from

their baseline levels over the 2003-07 period by the

percentages already mentioned. The initial export levels used in the analysis were obtained from the

February 2002 USDA baseline (USDA, Office of the

Chief Economist). All of the model simulation results

from the scenario are compared against the USDA

baseline projections in the discussion that follows. 

Figure A-2 shows the assumed reduction in wheat

exports under the scenario compared with the baseline.

In 2003/04 and 2004/05, exports under the scenario

decline relative to the baseline by 25 and 35 percent, or

by 244 million and 359 million bushels, respectively.

Exports partly recover in the succeeding years of the

analysis, averaging 15 percent less than the baseline.

The decline in exports under the scenario reduces the

farmgate price of wheat (fig. A-3). Prices decline from

the baseline by 17 and 19 percent, or by 45 and 53

cents per bushel, in 2003/04 and 2004/05, respectively.

The loss is larger in the second year because the

sharply higher prices expected to be received by U.S.

competitors in 2003/04 result in significantly expanded

8  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA

3 The wheat submodel in FAPSIM is an aggregate model. It does

not distinguish between the different classes of wheat.
production in 2004/05. We assumed that the European

Union would not put a tax on wheat exports to hold

down its domestic prices. U.S. domestic prices partially recover relative to the baseline in succeeding years

with recovery of some of the lost export markets. The

prices under the scenario are still below baseline prices

by 13 percent in 2007/08.

With domestic prices lower under the scenario, the

U.S. area planted to wheat declines relative to the

baseline (fig. A-4). However, the response by producers to the lower wheat prices is muted somewhat over

the initial years because of U.S. Government farm programs. Part of the market revenue loss that producers

experience due to lower farm prices over this period is

offset by an increase in marketing loan benefits that

they receive from the government. As a result, the area

planted to wheat declines relative to the baseline by 2

and 3 percent, or by 1.0 and 2.1 million acres, respectively, in 2004/05 and 2005/06. In contrast, area planted to wheat declines by 2.7 million acres below the

baseline level in 2007/08 when producers are not

expected to receive any offsetting compensation

through marketing loans. Because the production

response is muted in the early years, excess production

occurs, causing the price impacts to be larger than they

would be in the absence of government programs.

With lower prices under the scenario, domestic feeding

of wheat increases sharply, by 32 and 107 percent, or

by 88 and 295 million bushels, in 2003/04 and

2004/05, respectively. With smaller price impacts in

the succeeding years, the changes in feed demand also

Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  9

Figure A-2

U.S. wheat exports

Mil. bu

Source: FAPSIM.

2002 03 04 05 06 07

600

700

800

900

1,000

1,100

1,200

Baseline

Scenario

Marketing year

2002 03 04 05 06 07

2.20

2.40

2.60

2.80

3.00

3.20

Figure A-3

U.S. wheat price

$/bu

Source: FAPSIM.

Baseline

Scenario

Marketing year

2002 03 04 05 06 07

58

59

60

61

62

63

Figure A-4

U.S. wheat planted area

Mil. acres

Source: FAPSIM.

Baseline

Scenario

Marketing year
become smaller. Nonetheless, wheat feeding under the

scenario remains above the baseline level by about 32

percent in 2007/08. Part of the reason these impacts

are large is that the model solution was constrained to

ensure that the price of wheat never falls below its

feed value in relation to the price of corn. Wheat displaced corn as an animal feed to the extent necessary

to ensure this constraint was satisfied.

Total domestic use of wheat is estimated to rise by 7

and 22 percent, or by 90 and 296 million bushels, for

2003/04 and 2004/05, respectively (fig. A-5). This rise

is almost entirely due to the increased feeding of

wheat, with only a slight increase in food use. Seed

use declines under the scenario relative to the baseline

because of the reduction in area planted to wheat.

Even though wheat feeding increases sharply under the

scenario, this rise is not enough to offset export losses.

Thus, ending stocks are estimated to rise above the

baseline by 22 and 27 percent, or by 154 and 179 million bushels, for 2003/04 and 2004/05, respectively

(fig. A-6). Although the impacts on ending stocks

become smaller in the succeeding years of the scenario, stocks remain above baseline levels by 21 percent in 2007/08.

The reduction in wheat production and the lower farmgate prices under the scenario combine to reduce U.S.

cash receipts received by wheat producers from farm

marketings (fig. A-7). Cash receipts for wheat are estimated to drop below the baseline by $915 million and

$1,293 million in 2003 and 2004, respectively. By the

10  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA

2002 03 04 05 06 07

1,300

1,350

1,400

1,450

1,500

1,550

1,600

1,650

Figure A-5

U.S. domestic use of wheat

Mil. bu

Source: FAPSIM.

Baseline

Scenario

Marketing year

2002 03 04 05 06 07

600

650

700

750

800

850

900

Figure A-6

U.S. wheat ending stocks

Mil. bu

Source: FAPSIM.

Baseline

Scenario

Marketing year

2002 03 04 05 06 07

4.50

5.00

5.50

6.00

6.50

7.00

7.50

Figure A-7

U.S. wheat cash receipts

$ bil.

Source: FAPSIM.

Baseline

Scenario

Calendar year
final year of the analysis, cash receipts remain below

baseline levels by $1,167 million. Cumulative wheat

cash receipts decline by $5.8 billion below the baseline

over the 2003-07 period.

No marketing loan payments are assumed for wheat

over the 2003-07 period under the baseline. However,

the price declines for wheat over the 2003-05 period

under the scenario are sufficient to trigger marketing

loan benefits. The payments to wheat producers are

$0.7, $0.6, and $0.2 billion for 2003/04, 2004/05, and

2005/06, respectively. The cumulative marketing loan

benefits associated with all crops increase by $2.0 billion above the baseline over the 2003-07 period. 

As suggested above, other commodities are also affected by the price adjustments that occur in the wheat

sector under the scenario. As the profitability of wheat

production declines, producers shift production from

wheat to alternative crops. The increase in production

causes the prices for other crops to decline. However,

the price changes associated with other crops are small

in relation to the price changes for wheat. Farm prices

of other crops change by less than 5 percent from their

baseline levels over the 2003-07 period. The price

impacts for the livestock sector, stemming from lower

feed costs, are even smaller. 

The farm price of corn is estimated to decline below

the baseline level by 4.5 percent in 2003/2004 as livestock producers shift from corn to the lower priced

wheat in their feed rations. On average, corn prices are

1.3 percent below baseline levels over the 2003-07

period, with comparable changes for other feed grain

prices. As a result, cumulative cash receipts for feed

grains decline by $1.2 billion below the baseline over

the 2003-07 period.

With lower wheat exports and prices under the scenario, the value of U.S. exports of wheat declines

below baseline levels. The cumulative value of total

U.S. agricultural exports is estimated to fall by over

$6.3 billion over the 2003-07 period under the scenario

(fig. A-8). Although most of the decrease is associated

with wheat, there are also downward adjustments in

the value of exports for other commodities due to

lower prices.

Because prices of all agricultural commodities decline

under the scenario, total U.S. cash receipts from the

farm marketings decline below baseline levels.

Cumulative cash receipts over the 2003-07 period are

estimated to be $10.4 billion below the baseline level.

More than half of this decline is associated directly

with wheat. There are also some offsetting adjustments. Because there is less total crop area planted

under the scenario, producers incur fewer production

expenses. In aggregate, cumulative farm expenses are

seen as $2.9 billion below the baseline level over the

2003-07 period. In addition, with producers receiving

increased government support payments through marketing loan benefits, cumulative net farm income over

the 2003-07 period is estimated to be $5.3 billion

lower than the baseline level (fig. A-9).

The average impacts discussed here would not be

spread evenly across the Nation’s wheat sector.

Because Karnal bunt deregulation would be focused on

hard red winter and soft red winter exports, impacts

would center on wheat producers in the Central and

Southern Plains and the Southeastern region of the

country. It is possible that a longer run effect of deregulation would be to reduce wheat acreage in the

Central and Southern Plains and to increase wheat

acreage in the Northern Plains, if foreign customers

continue to be reluctant to purchase wheat grown in

areas potentially affected by Karnal bunt.

The analysis assumes that domestic millers of wheat

are not affected by deregulation. However, if domestic

millers do respond negatively to wheat from potentialEconomic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  11

2002 03 04 05 06 07

50

55

60

65

70

Figure A-8

U.S. value of agricultural exports

$ bil.

Source: FAPSIM.

Baseline

Scenario

Calendar year
ly affected areas, the economic incentives to shift

wheat acreage to the North would be enhanced.

Conclusions

Karnal bunt seldom results in significant yield losses

to wheat in the field. However, Karnal bunt affects

flour quality if more than 3 percent of the grains are

bunted because it gives off a fishy odor. In addition,

pasta products made with flour contaminated with

Karnal bunt can have an unacceptable color. The fungus that causes Karnal bunt does not produce any toxic

compounds in leaf, stem tissue, or seed that pose

health risks when consumed. Thus, Karnal bunt is a

food quality issue rather than a food safety issue.

Because the fungus poses no risk to human health, the

U.S. Government does not have any food safety regulations concerning wheat infected with Karnal bunt.

However, the compensation payments for the Karnal

bunt quarantine regulatory program have totaled about

$35 million from 1996 through 2001.

Even though scientific evidence is that Karnal bunt

posses no health risk, many U.S. wheat export markets

require that wheat from the United States be from

areas where Karnal bunt is not known to occur. Such

countries would likely resist importing U.S. wheat if

the certification procedures were terminated.

The assumed impact of terminating Karnal bunt certification is entirely through reduced exports. Using an

ERS model of U.S. agriculture, an export scenario was

evaluated. Domestic prices dropped sharply, which, in

turn, reduced the area planted to wheat. Although

wheat feeding rose with the lower prices, the increase

was not nearly enough to offset the loss of export markets. Wheat prices remained below baseline levels. The

reduction in wheat production and the lower prices

combined to reduce the total value of the wheat produced in the country, as well as the net income of U.S.

agriculture. The effects primarily affected producers in

the Central and Southern Plains and in the Southeast.

The cumulative total reduction of national net farm

income from 2003 to 2007 is $5.3 billion. The cumulative marketing loan payments associated with all crops

increase by $2.0 billion above the baseline over the

2003-07 period.

This article does not consider the cost of testing of

wheat for Karnal bunt contamination, or the wheat

quality discounts that could emerge in the world marketplace. Other important issues include possible contamination of vessels and handling facilities, regulations for the transhipment of grain through the St.

Lawrence Seaway, and possible trade impacts for other

grains such as corn and soybeans if the Karnal bunt

quarantine system is deregulated.

References

American Phytopathological Society. 1996. Position

Statement of : The American Phytopathological

Society. The Use of Quarantines for Wheat Karnal

Bunt. APS Karnal Bunt Symposium Transcripts.

The American Phytopathological Society.

http://www.apsnet.org/online/karnal/index.htm.,

June 24 - August 16.

Bonde, Morris. Private communication. Agricultural

Research Service. U.S. Department of Agriculture.

March 7, 2002.

Combs, Susan. 2001. Ag Commissioner Recommends

Changes to Current Karnal Bunt Policy. Austin.

http://www.tpma.org/news_reports/reports/072001G

.html. July 20.

Davila, G. Fuentes. 1997. Karenal Bunt of Wheat.

CIMMYT, Mexico. Available at: http://www.cimmyt.org/Research/wheat/kb/htm/KBcontents.htm.

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12  Wheat Yearbook/WHS-2002/March 2002 Economic Research Service/USDA

2002 03 04 05 06 07

36

38

40

42

44

46

48

Figure A-9

U.S. net farm income

$ bil.

Source: FAPSIM.

Baseline

Scenario

Calendar year
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(DEFRA). 2001. Karnal Bunt. Available at:

http://www.defra.gov.uk/planth/pestnote/karnal.htm.

July 2.

Dobesberger, Erhard, Norma Alejandra Elizalde

Jimenez, and Ron A. Sequreira. (2001). An

Epidemiological Approach to Assessing the Risk of

Establishment of Karnal Bunt, Tilletia indiaca

Mitra, in North America. North American Plant

Protection Organization. http://www.nappo.org/

KarnalBunt/KB-Aug25-01.pdf. October.

Forster, Robert L., and Blair J. Goates. 1996. Karnal

Bunt of Wheat. Cooperative Extension Service.

University of Idaho. CIS 1067. Available at:

http://www.uidaho.edu/ag/plantdisease/kbwheat.htm. 

Kelly, Keith. 1996. Karnal Bunt, Where Are We

Headed? APS Karnal Bunt Symposium Transcripts.

The American Phytopathological Society. Available

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June 24 - August 16.

Murray, Gordon M. and John P. Brennan. 1996. The

Risk to Australia from Tilletia indica Mirta, the

Cause of Karnal Bunt of Wheat. APS Karnal Bunt

Symposium Transcripts. The American

Phytopathological Society. Available at:

http://www.apsnet.org/online/karnal/index.htm. June

24 - August 16. 

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Economic Research Service/USDA Wheat Yearbook/WHS-2002/March 2002  13